Cotton stock swells as demand shrinks

June 05, 2008 - China

By the end of May, Xinjiang Cotton Group, the largest cotton enterprise in Xinjiang, held nearly 100,000 tons of stock. This situation is not restricted to this particular Group; at present there is around one million tons of stock in Xinjiang waiting to be sold, forming a proportion of 45.5 percent of the total acquisition.

According to Xinjiang Cotton Association, in the year 2007-08, supply and marketing system of Agricultural Construction Corps and other channels, purchased nearly 2.2 million tons of lint. As a result, the sale was down 20 percent from the same time last year.

Experts believe that, Renminbi appreciation, monetary tightening and lowered export rebate rates have made a negative impact on textile companies, which has directly affect the cotton sales in the region.

At present, domestic textile units are updating themselves in terms of technology and production, thus, ordinary yarns are upgraded into high-density yarns. This is one of the reason for reduced cotton consumption.

Recently, the industrial stocks of domestic textile companies has been lowered to 15 days from 50 days in the past and operate production by 'from hand to mouth' purchasing policy.

To add further woes, the imported foreign cotton is in low price level, and therefore, cotton enterprises in Xinjiang face increasing business risks.